How Does a Car Trade-in Work? Everything You Need to Know About Trading in Your Old Vehicle

The auto industry is no longer as stable as it was a few years ago. Due to new car supply shortages, the demand for used vehicles has skyrocketed. Used vehicles have never had more value and now might be the perfect time to consider selling. We’ll take you through the benefits of dealership car trade-ins and the disadvantages of selling your car privately. 

5 Steps of a Car Trade-in

Selling your used vehicle to a dealership has never been simpler. In fact, the entire process can be broken down into five steps:

  1. First, you need to state your desire to make a trade-in at the dealership of your choice. 
  2. Second, you agree to allow an appraiser to test drive your vehicle.
  3. Third, the appraiser will perform a series of quick vehicle inspections to generate an evaluation of your used car’s current value and give you an offer based on those estimations.
  4. During the fourth step, you enter negotiations with your dealership regarding your proposed offer. Many factors can affect this stage of the process, but your goal is to reach a final offer as fair as possible. 
  5. The fifth step involves either applying that offer to your new vehicle as a down payment or finalizing a sale and  walking away with a check that you can use to car hunt further.

Pro Tips for Raising Your Trade-in Value

Your end game should always be finding ways to get the most value out of your trade-in. Here are two stress-free ways you can do this:

Cleaning Your Car 

The cleanliness of the car you want to trade in matters. The less labor a dealership must invest in your car’s restoration, the easier it becomes to resell, reducing any additional fees to the trade-in value. After a deep internal and external vehicle cleaning, used sellers can potentially see upwards of a 200% return on their final offer. 

Proper Documentation

Proving you cared about preserving your vehicle’s health gives you a leg up in negotiations. Your best chance is to save all repair, maintenance, and vehicle history reports. Keeping essential items like user manuals is also important. This will provide peace of mind for the next owner, easing the resale turnover. 

Benefits of Dealership Trade-ins

Tax Breaks

When making a car trade-in, the best dealership incentives are tax advantages. These vary from state to state, but in most cases, you only pay sales tax on the final price of your new vehicle after a trade-in credit has been deducted from it. 

Ex: If your new car costs $15,000 and you have a trade-in credit of $5,000, you may only owe tax on $10,000 depending on your State.


Selling through a dealership is less time-consuming than doing it yourself. You avoid liabilities from mistakes in the registration transfer and  root out scammers from potential buyers. But most importantly, if you don’t have negative equity (where you owe more than your car is worth) in your car, some dealerships will buy out your remaining debt to make the sale. 

The Hidden Disadvantages of Private Trade-ins

Most traditional driver solutions will try to convince you it’s better to avoid dealerships entirely. Selling a used car “might” pay more if you do it yourself. What people often don’t consider is the serious disadvantages to taking this path:

  • Time: A private sale doesn’t always mean you’ll save time or see higher financial returns than a car trade-in. Statistically, a dealership trade-in sells 10 days faster and generates at least $1,000 more in profit than privately selling a car. Personally selling your car requires hard work taking photos, researching pricing,  arranging the sale, placing ads, calling potential buyers, and driving to meet those buyers without a guaranteed deal.


  • Negotiation: You’re responsible for researching your car’s value without a dealership. This means keeping track of specific elements that impact value, not just the condition of your vehicle. What’s your mileage at? Is it the right time of year to sell this type of car? Even the color of your car affects your profit margins. 

How CarRx Makes Your Life Easier

The CarRx app automatically helps you save money when you trade-in your vehicle by allowing you to record all prior maintenance and care done on your car. By using CarRx’s built in maintenance history log, you can go into trade-in negotiations with confidence about the state of your vehicle. Everyone likes to know exactly what they’re buying, and showcasing a cared for car can bring in many negotiation perks. 

Plus, dealerships can approach you with car trade-in deals through direct communication on CarRx. Your dealership can send you custom deals and offers based on your vehicle reports and driver data. 

To learn more about making your car’s value work for you, please visit us here